The acronym IPTU is used to identify the Property and Urban Territorial Tax. It fits the definition provided for in art. 3 of Law No. 5.172 (the National Tax Code, CTN). More closely, the IPTU is regulated between articles 32 to 34, which defines who is the taxpayer, its calculation base, as well as the taxable event that allows the collection by the municipality.

The IPTU, however, is a classifiable tax, that is, it can be divided between residential and commercial. There are differences as to who should pay, why and what are the characteristics of the calculations to establish the amount to be charged.

In order for you to better understand the difference between residential and commercial property taxes, we will talk about their purposes and other details. Come on!

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What is IPTU?

The Property and Urban Territorial Tax is a tax whose competence to legislate and administer lies with the municipality. Each city, therefore, has the power to create its respective IPTU, as long as it observes the guidelines on taxes present in the Federal Constitution (CF) and in the National Tax Code (CTN).

It is a contributor to the IPTU who owns the property, the useful domain or the possession of the immovable property in an urban area of ​​the municipality. In other words, any natural or legal person who falls into this situation must automatically pay the respective tax to the municipality to which he is linked. Therefore, each city will have a different tax amount, due to the variation in its calculations.

Generally speaking, to calculate the IPTU, it is necessary to multiply the property’s market value by the rate charged, in accordance with what is provided by municipal legislation. The property’s market value is defined by the Public Authority after a technical evaluation of the land, house or apartment in question.

As an example, Municipal Law 13,692 / 2005, of São Paulo, establishes quotas of 3%, 1.6%, 1.5%, 1.0% and 0.5%, depending on the type of property. Then, for each different situation, we will have specific rates that will then be multiplied by the venal value of each property.

In the case of a property whose value is R $ 160 thousand, with an applied rate of 0.5%, we will have an annual IPTU value of R $ 800.00. In most situations, it is possible that this amount will be paid in a single installment, at a discount, or in 12 installments, paid monthly, like the other expenses of a residence.

In the event of default, there will be sanctions, such as the name of the taxpayer’s inactive debt.

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What is its purpose?

Like all other taxes, the IPTU has as its main purpose the collection of financial resources for the State. In this case, the finances are directed to the municipality’s coffers, which will use them to pay for the most diverse public expenses. In other words, the function of the IPTU is basically fiscal.

However, it is also worth remembering that the IPTU is provided for in 4§, art. 182, of the Federal Constitution. In other words, the tax is situated within the scope of the urban development policy, whose objective is “to order the full development of the city’s social functions and guarantee the well-being of its inhabitants”.

One of the ways to assert the social function of the IPTU is to make use of its progressiveness. In other words, the tax will be more expensive for the taxpayer than failing to comply with the guidelines of the Municipal Master Plan, for example. It is a type of sanction that seeks to compel the citizen to follow the political guidelines created by the municipal administration.

In general, the Master Plan, foreseen in articles 39 and 40 of the City Statute, is the “basic instrument of urban development and expansion policy”. In addition, it is “an integral part of the municipal planning process, and the multi-annual plan, the budgetary guidelines and the annual budget must incorporate the guidelines and priorities contained therein” and must also “encompass the territory of the municipality as a whole”.

The IPTU tax, when interfering in the fulfillment of the Master Plan, also has, therefore, a social purpose, aimed at guaranteeing the well-being of the city’s inhabitants.

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What is the difference between residential and commercial property tax?

As we have seen, the property tax is classifiable and is divided between residential property tax and commercial property tax. But how to recognize both types? The most direct difference between residential and commercial property taxes is in the purpose of possession or ownership of the property that justifies the collection of the tax.

In other words, when the property is intended for commercial purposes, the commercial property tax must be paid to the municipality. The residential, as the name says, deals with the property used for housing.

The performance of a commercial activity in a property will probably change the rate of IPTU, notably because there will be more contributory capacity of the owner. As a result, more financial resources may be acquired by the municipality for the performance of its public activities, in order to contribute to the general well-being of the city’s inhabitants.

Note that the social purpose of the commercial property tax may be more pronounced, therefore, when compared to the residential property tax, if we think from the point of view of contributory capacity. The possibility of linking obedience to the Master Plan to the collection of commercial property tax streamlines this instrument of urban policy, contributing to its expansion and effectiveness in the daily lives of citizens. Neighborhoods or commercial regions tend to be more sensitive and important to urban planning!

Another component of the calculation basis that may also fluctuate is the property’s market value, depending on the commercial activity performed, as it may cause appreciation and an increase in price in urban regions. Consequently, the value of IPTU will tend to rise. In the case of a property or just a residential region, the property’s market value is less likely to fluctuate.

These are the most relevant information when we think of the Property and Urban Territorial Tax (IPTU), its definition, characteristics, calculation basis, rate and main legal aspects. Now, you already know the difference between residential and commercial property tax and understand how it influences the price of real estate, right?

Did you like the information? So, take the opportunity to understand, too, what the IPCA is and how it is calculated!